Can't Make Payments on a Debt? Take These 3 Steps Right Away

Being in debt can be really stressful -- especially if you feel like you're struggling to make the monthly bills out of your bank account. If you've found yourself in a situation where you're unable to pay the minimums you owe to your credit card company or other creditors, then this can be an especially bad situation to be in.

If that's something that's happening to you, there are three steps you should try to take right away to deal with this serious financial issue.

1. Explore options to increase your income

If you are struggling to make payments on your debt, see if you can do something -- at least temporarily -- that will give you the funds you need to make fulfilling your obligations to creditors easier.

Missing payments can be detrimental to your credit score and leave you with late fees and other penalties that make debt payoff even more expensive in the long run. So if you can take on a side hustle or work some overtime temporarily to ensure your payments are on time, you'll be a lot better off.

2. Look into options to lower your monthly payments

You can also consider ways to reduce the payments that you owe. This could involve refinancing your loans, for example. If you have a personal loan with a 15% interest rate and could refinance it using a personal loan with a 10% rate, your monthly payments and total borrowing costs could decline.

Both lowering your interest rate and making your loan repayment term longer can reduce your payments. Just be aware that if you refinance into a loan with a longer time and agree to pay interest for more years, this can make total borrowing costs higher even if it does lower your monthly payments. This may be worth it, though, to give you some breathing room if you're struggling right now to make your payments.

3. Contact your creditors

If you can't increase your income or reduce your monthly payments, the next best option is to contact your creditors.

Your creditors do not benefit if you stop paying. In fact, they will usually end up having to charge off the debt and sell it for pennies on the dollar to collectors (or, they'll get stuck repossessing or foreclosing on a car or home if the debt is secured).

Creditors know it's in their best interest to try to help you pay as much as possible, so they are often willing to work with you if you get into financial trouble. They may allow you to pause payments for a period of time (although interest will keep accruing) or to go on a payment plan that allows you to modify how much you pay.

You won't know your options until you reach out, and you should do that as soon as it becomes clear that making your payments as promised isn't going to work. Taking swift action can help you minimize added late fees and interest charges if you're able to work out an arrangement to pay off your debt in a different way.

By taking these steps, you can find a solution to the debt you're struggling with so you can begin to rebuild your financial life.